IRS Tangible Property Regulation
TPR Tax Consulting
The Tangible Property Regulation (Repair Regs) are complex. Difficulties may arise in determining whether it is a Repair Expense or Capitalized. Do you understand the definitions of Betterment, Adaptation, and Restoration (BAR)? Do you understand the “Significance Test” (Materiality Test)? Do you understand how to calculate a Partial Asset Disposition?
We assist property owners and CPA’s utilize the Tangible Property Regulation (TPR) to its fullest. Below are a list of areas we specialize in with TPR Tax Consulting Services:
- Repair Expense vs Capitalize Review.
- Partial Asset Dispositions Calculations.
- Capital to Expense Reversals.
- Lease Agreements TI Allowance.
- CPE for CPA’s.
We provide audit and inquiry protection for these services. Contact us for an initial complimentary consultation.
Expense vs. Capitalization
A property owner can benefit with a Cost Segregation Study when applying the new Tangible Property Regulation in determining Expense vs Capitalization. Contact us for a Free Preliminary Analysis.
The IRS outlined numerous factors that must be considered when deciding if an expenditure is a capitalized improvement or an expense. The IRS defined (BAR) Betterments, Adaptation, and Restoration and the decision tree you go through.
The building should have a cost segregation study to define the 8 building systems for the “Unit of Property” in order to apply the “Materiality Test” or “Substantial Test” as defined by the IRS.
The 8 building systems are: HVAC, Electrical, Plumbing, Gas Distribution, Fire Protection and Alarm, Elevator, Escalator, Security Systems, Other Systems as identified in IRS Publications.
Have you defined your building systems and Unit of Property?
Partial Asset Dispositions
A property owner can benefit with a Cost Segregation Study when applying the new Tangible Property Regulation in determining Partial Asset Dispositions. Contact us for a Free Preliminary Analysis.
Calculating Partial Asset Dispositions can occur annually depending upon the improvements made during the tax year. TPR permits a property owner to take a partial asset disposition (write-off) of building components that have been retired, removed, discarded. If you capitalized the improvement, you probably have some sort of building components that were discarded permitting for a Partial Asset Disposition.
Cost Segregation Study will assign a value to those building components so the owner can take a write-off of any remaining depreciation of that building component and lower the building basis. You get an immediate Tax Benefit by writing off the remaining depreciation of the discarded building component. You also get a Tax Benefit in the future as it lowers the building basis which in turn lowers taxes owed when the building is sold in the future. Capital Gains Tax (20%) vs. Depreciation Recapture Tax (25%).
Cost Segregation Study
Contact us for a Complimentary Consultation